Correlation Between IShares Basic and IShares Consumer
Can any of the company-specific risk be diversified away by investing in both IShares Basic and IShares Consumer at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining IShares Basic and IShares Consumer into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares Basic Materials and iShares Consumer Staples, you can compare the effects of market volatilities on IShares Basic and IShares Consumer and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in IShares Basic with a short position of IShares Consumer. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Basic and IShares Consumer.
Diversification Opportunities for IShares Basic and IShares Consumer
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between IShares and IShares is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding iShares Basic Materials and iShares Consumer Staples in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Consumer Staples and IShares Basic is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on iShares Basic Materials are associated (or correlated) with IShares Consumer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Consumer Staples has no effect on the direction of IShares Basic i.e., IShares Basic and IShares Consumer go up and down completely randomly.
Pair Corralation between IShares Basic and IShares Consumer
Considering the 90-day investment horizon iShares Basic Materials is expected to under-perform the IShares Consumer. In addition to that, IShares Basic is 1.53 times more volatile than iShares Consumer Staples. It trades about -0.62 of its total potential returns per unit of risk. iShares Consumer Staples is currently generating about -0.53 per unit of volatility. If you would invest 6,986 in iShares Consumer Staples on September 24, 2024 and sell it today you would lose (436.00) from holding iShares Consumer Staples or give up 6.24% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
iShares Basic Materials vs. iShares Consumer Staples
Performance |
Timeline |
iShares Basic Materials |
iShares Consumer Staples |
IShares Basic and IShares Consumer Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with IShares Basic and IShares Consumer
The main advantage of trading using opposite IShares Basic and IShares Consumer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Basic position performs unexpectedly, IShares Consumer can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in IShares Consumer will offset losses from the drop in IShares Consumer's long position.IShares Basic vs. Mast Global Battery | IShares Basic vs. Materials Select Sector | IShares Basic vs. SPDR SP Metals | IShares Basic vs. First Trust Materials |
IShares Consumer vs. iShares Consumer Discretionary | IShares Consumer vs. iShares Industrials ETF | IShares Consumer vs. iShares Utilities ETF | IShares Consumer vs. iShares Basic Materials |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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